Sports teams plan for deepening recession - The Vancouver Sun
Canucks, Lions, Giants, Whitecaps and Canadians all have strategies to fight weaker economy
BY BRUCE CONSTANTINEAU
Major sports leagues slash head office staff. Financially strapped corporate sponsors bail on multi-million-dollar deals with teams and athletes. The Arena Football League even suspends operations for a year.
So how do Vancouver team owners and executives deal with the massive challenges facing the sports industry during a global recession in 2009?
If you're B.C. Lions owner David Braley, you don't panic.
"I don't think the recession will have a big impact on us," he said in an interview. "We're a very affordable product and we're going to make sure we don't nick anybody too badly. We're building our business and I see us continuing to grow both on and off the field."
The team has raised ticket prices modestly for next season, with season tickets increasing from $1 to $3 a game. So a 10-game, upper-level season ticket that cost $275 last year will cost $285 in 2009 while lower-level ticket that cost $400 will increase to $430.
Braley's optimism stems from his team's recent financial success and the apparent resilience of the B.C. economy.
"The Canadian economy lost 71,000 jobs in November and more than 60,000 of those were in Ontario," he said. "Parts of the B.C. economy are hurting but it has not slowed down dramatically."
The Lions have grown from a money-losing team with average game attendance of just 18,600 in 1996 into a profitable club with average game attendance of more than 34,000 last season.
Braley said the team may lose a few corporate sponsors next year, but he expects those losses to be offset with new sponsors.
"If you're a very good aggressive marketing company, which I think we are, then you can replace them with other sponsors who are doing well in these times," he said.
Braley said the Lions lost one client who decided not to lease a corporate suite next season but quickly replaced that customer with someone who was on a waiting list for a suite.
Vancouver Canucks president Chris Zimmerman said the major corporate support secured for his team this season remains solid, although some smaller relationships have been affected as a few businesses reconsider their future investments. Those situations involve future sponsorship or ticket purchases.
"The business that's already been written for this year has been solid but we know that in this economy, it's possible some partners may not be able to renew for next season," Zimmerman said.
"We certainly don't live in a bubble and recognize there are some significant and unprecedented changes going on."
He said the team will work hard to bring in new sponsors next year, noting it is already talking with a wide range of companies in "various service sectors."
The Canucks were one of the strongest franchises in the NHL last season, with Forbes magazine estimating the team had $19.2 million US in operating income on $107 million US in revenues.
Zimmerman said future ticket prices depend on supply and demand -- and demand remains strong, with the team enjoying more than 230 consecutive sellouts and a season-ticket waiting list of about 7,000.
"We don't know yet if we'll see any softness in those numbers but we expect to have plenty of demand to continue to fill the building," he said.
While the Toronto Blue Jays recently laid off about 40 workers and leagues like the NBA, NFL and Major League Baseball cut staff to save money, Zimmerman said layoffs are not in the Canucks' 2009 plans.
"We'll assess that as we watch how the macro-market evolves but at this point, that's not a requirement for us," he said. "We have certain job openings that we continue to fill."
Whatever happens to the economy in 2009, making the NHL playoffs and going on a long playoff run will do wonders for the team's bottom line. Playoffs provide a welcome combination for team owners -- player expenses go down and revenues go up.
Players' annual salaries have been paid by the time the playoffs begin so they play for an equal share of playoff revenues. Playoff ticket prices increase each round, with Stanley Cup final tickets costing up to 200 per cent more than regular season prices.
Zimmerman said the "significant investment" in signing free-agent centre Mats Sundin -- who will receive about $5.6 million US for playing the rest of this season -- was made because it's expected to produce financial returns.
"It will produce better results on the ice and obviously we feel that's going to translate to the business," he said.
Zimmerman said the Sundin signing and the recent Trevor Linden jersey retirement have created tremendous goodwill around the Canucks brand.
"In a challenging economy, we believe that the energy level and interest in the Canucks is at a very, very high level right now," he said.
The NHL told league owners in early December it still expects revenues for the 2008/09 season to increase by two per cent to $2.65 billion US. League officials acknowledge the economy could hurt revenues later this season but so far, the impact has been negligible.
"Right now, yes, that's our expectation [that revenues will rise slightly]," Zimmerman said. "Could it end up being a little softer? Sure. But it's plus or minus just a few percentage points either way."
With the exception of the Lions -- who play all their games in Canada -- Vancouver sports teams face higher U.S.-dollar costs next year if the Canadian dollar remains significantly below the U.S. currency, and no one will feel that hit more than the Canucks.
If the dollar stays near the 80-cents-US level throughout 2009 -- a 20-cent drop from last summer -- the team estimates its player payroll will increase by about $10.8 million because players are paid in US dollars.
Vancouver Canadians owner Jake Kerr feels his team's affordable price point will help it weather any kind of recessionary storm in 2009.
"Historically, minor league baseball is reasonably recession-proof because its price point is so low," he said. "We're hoping families will still understand that a trip to The Nat next summer for a family of four is still only 50 bucks.
"We're holding the line on ticket prices because we know we have to provide value for money."
Kerr said the 2008 season was a success, with the team breaking even on operations and attendance increasing by about 10 per cent to average about 3,400 a game. He said the Canadians will try to boost attendance next season by marketing more aggressively to untapped potential fans -- including women, ethnic groups and youth baseball players.
Kerr said the team does not expect layoffs but said it may require fewer people for field maintenance because major improvements were made to the playing field last year.
He said no corporate sponsors have bailed on the team so far and noted the team plans to open a second corporate box, for 10 to 15 people, next season. A 30-person corporate box was sold out last year.
The City of Vancouver and the team still plan to spend about $2 million on stadium improvements after the 2010 Olympics, including infrastructure upgrades and a new electronic scoreboard.
Vancouver Whitecaps president Bob Lenarduzzi said his team's corporate sponsorship dollars rose slightly during its 2008 USL championship season and at this point, all partners plan to be back next season.
"Our objective is to just bunker down and continue to do the work that will position us to go forward as we come out of this downturn," he said. "You can't avoid the reality of a slowing economy."
The Whitecaps have increased 2009 season ticket prices by seven per cent but left single-game ticket prices unchanged.
The team employs 36 people and Lenarduzzi does not expect layoffs, especially if it succeeds in securing a new Major League Soccer franchise to begin play in 2011. That decision is expected in the next few months.
Lenarduzzi said every club department is determining what it needs to do if the team joins MLS, with increased staffing in sponsorship and ticket selling being likely outcomes.
"We're kind of in limbo now but we're not just sitting back and waiting until the announcement is made," he said. "We're planning for a positive response."
The Whitecaps have hired a fundraising director to attract corporate philanthropic or foundation funds for youth and women's soccer development, programs currently supported by team owner Greg Kerfoot.
"We know we probably couldn't have started this at a worse time but we're still finding some success," Lenarduzzi said.
Vancouver Giants owner Ron Toigo said junior hockey games are an affordable, family-friendly product but admits a full-blown recession could still affect team operations.
"This type of thing affects absolutely everybody and anybody who thinks they're insulated from it is dreaming," he said. "You just have to manage your way through it."
Toigo said the team's corporate commitments are secure for this season but noted it will be "interesting" to see how corporate sales go next summer. He said most sponsorships are in the $20,000-to-$25,000 range.
"We aren't a major financial commitment to anybody so we're not likely to be the first cut someone makes," Toigo said. "We will get hit by some of that but not to the extent that some of the bigger guys will get hit."
The Giants -- boosted by long playoff runs -- have made operational profits the past two seasons and Toigo said the organization is already lean so there's not a lot of room for cost cutting.
"Our costs are what they are and if you have to lose money for a year or so, then that's what you do," he said. "You shouldn't change the way you operate."
Octagon Canada managing director Kim Smither said the sports marketing company recently completed a survey that found the recession will cut into game attendance and corporate sponsorship.
"But fans' emotional connection to teams will remain very high so viewership and interest in sports doesn't change, regardless of the economy," she said.
Smither said a recession could actually become a long-term opportunity for teams and sponsors that work through it in the most efficient manner possible.
"It will force teams to deliver quality products with value and ensure they are still accessible to the public," she said. "The passion for sport won't go away so companies that align with that passion will have a great opportunity to break through the clutter."
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